"Portugal and Spain are problems, but the worry has shifted from crisis mode -- specifically the failure of major banks -- to concern about the length and depth of a European economic recession," said Rex Macey, chief investment officer of Wilmington Trust Investment Management.

"A recession is not good, but it's short of the 'crisis' that had the markets alarmed a few months ago," he added.

The move has helped shares of European as well as U.S. banks recover this year. In fact, Paris-based BNP Paribas' stock tumbled more than 30% in 2011, but has already climbed 10% this year. And Bank of America (BAC, Fortune 500), which was the worst performer in the S&P 500 last year thanks to its 58% plunge, has rebounded more than 65% in 2012.

"It's like we went from having to deal with a heart attack, where we were worried about immediate survival, to cancer," said Macey. "Europe's debt problems are still very serious, as are the side effects of austerity and inflation, but now we have a bit of time to deal with them."

Experts most commonly cited "uncertainty in Washington" as a significant risk, especially with the election coming in November. The face-off for the presidential seat is especially unsettling this year, since lawmakers will likely take up comprehensive tax reform and the deficit during the next administration.

Day said investors will also have to keep a close eye on bond yields in Spain, Italy and Portugal as governments continue to auction off their debt. Earlier this week, a lackluster Spanish debt auction raised concerns about the country's ability to meet its 2012 budget deficit target, and the yield on 10-year Spanish bonds jumped to its highest level in more than three months.

While recent auctions have mostly been of short-term debt, Day said future sales will be more telling since they will include longer-term debt. "Bond buyers may be willing to lend money for a few yeas, but perhaps not for later down the line," he said.

Day also doubts that Greece's most recent bailout will keep the cash-strapped country funded through 2014 as it is intended to. In fact, he thinks Greece could be asking for more money before the end of the year.

"For a while, everyone thought they could push Europe aside since it's been out of the headlines for a while, but the situation clearly hasn't been completely dealt with," said Day.